Why BCP and BCM Are Now at the Core of Corporate Management #49

The essential purpose of a company is to continue providing valuable business in society.

However, the modern management environment is characterized by unprecedented levels of uncertainty.
Predicting the future is difficult, and the underlying conditions are constantly changing.

In such an environment, the perspective of risk management, including BCP (Business Continuity Planning) and BCM (Business Continuity Management), becomes crucial.

■ Risk is not a "crisis" but a "gap"

When people hear the word "risk," many imagine sudden crises like earthquakes or accidents.

However, in essence, risk is
the possibility that things will not proceed as expectedand the impact that follows.
In other words, risk is not the "crisis itself," but a concept closer to the "gap between plan and reality."

Crises manifest as a result of leaving this gap unaddressed.

■ Risks that are hard to see erode companies the most

What is particularly troublesome in corporate management is not the risks that occur suddenly, but those that progress slowly.

A prime example is inflation.
* Rising raw material costs
* Increasing energy costs
* Rising labor costs

These do not appear as a single shock, but gradually squeeze the profit structure.

Even more caution is required regarding stagflation.
In a state where the economy is stagnant while prices continue to rise, a structural deterioration occurs where:
* Sales do not grow
* Costs continue to increase
The characteristic of such risks is that they are "hard to notice."

Often, by the time you notice, management strength has already been depleted.
That is why it is important to sharply foresee the essence of things at the stage of signs and catch anomalies.

■ The essence of BCP and BCM

The concept of BCP is simple.
It is to operate on the premise that "something will definitely happen."

In an environment with many natural disasters like Japan, external factors such as:
* Earthquakes * Typhoons * Heavy rain
cannot be avoided.

What is important is not the "response capability after an occurrence," butwhether a design that prevents business from stopping even if an event occurs is in place beforehand.

This way of thinking applies not only to disasters but also to changes in the economic environment.
This is because inflation and demand fluctuations are also external factors that shake corporate activities.

While BCP is a plan, BCM is a management activity that continues to execute and improve it.

The risks covered by BCM are broad.
* Natural disasters
* Occupational accidents/accidents
* Infectious diseases
* Equipment failures
* Cyber attacks
* Changes in the economic environment, etc.

What they all have in common is the potential to "stop business."

The essence of BCM lies ina design that minimizes the way business stops while assuming that it will stop.

■ Risk management is not "defense" but a "prerequisite"

Risk management is often perceived as a defensive strategy, but in reality, it is not.

Rather, it is a prerequisite for making offensive decision-making possible.

For example, in an inflationary environment, decisions such as:
* Judging price pass-through
* Redesigning value-added offerings
* Reviewing the business portfolio
are required.

What is important here is that maintaining the status quo is not safe.
Not changing can itself become a risk.

The essence of decision-making lies in the interpretation of information and action.

A famous framework is "Sky, Rain, Umbrella."

* Sky: Fact (e.g., there are clouds in the western sky)
* Rain: Interpretation (it looks like it will rain)
* Umbrella: Action (carry an umbrella)

Risk response in BCM is the same.

What is important is not the "ability to see facts," but "how to interpret them and how to prepare" from there.
Not missing the signs is the very essence of business continuity.

■ BCP and BCM are corporate survival strategies

Risks do not come suddenly; they always begin with signs.

BCP is the blueprint for that preparation, and BCM is the mechanism to keep it running.
And risk management is not for being afraid.

It is a technique for continuing to challenge oneself amidst change.


"Be prepared, always"Only companies that hold this attitude can continue to create value sustainably even in an uncertain era.

Why is risk management important now?

The purpose of a company is to continue business that has significance in society.

However, the modern era is one of extremely high uncertainty.
The future is opaque, and prediction is difficult.

That is precisely why companies are required to have the ability to accurately grasp the risks that threaten management and their impacts, and to take measures in advance.
Risk is not the crisis itself.
It is the possibility that things will not go as predicted and the losses that arise from that.

Risks that are hard to see: Inflation and stagflation

When we hear the word 'risk,' we tend to imagine 'sudden events' like earthquakes or disasters.
However, what is truly troublesome in corporate management is risks that progress gradually.

A prime example of this is inflation.
• Rising raw material costs
• Increasing energy costs
• Rising labor costs

These do not pressure corporate profits all at once, but rather in stages.

Even more serious is stagflation.

A state where prices rise even though the economy is stagnant.
In other words, you fall into an extremely harsh environment where:
• Sales do not grow
• Costs continue to rise

Such risks do not have a clear 'moment of occurrence' like a disaster.

By the time you notice, your management strength may already be depleted.
That is why it is important to


catch the signs at the early stage and take the initiative.

Risk hedging is 'passive'

In judo, the first thing you learn is 'ukemi' (breakfall/passive defense).

On the premise of being thrown,
on the premise of losing,
you learn how to protect your body.

This is because to become strong,
you must challenge strong opponents.

If you are not thrown, you cannot become strong.
If you do not lose, you cannot become strong.

And you learn ukemi so that even if you are thrown, you can stand up immediately.

In other words, ukemi is risk management to make challenges possible.

The meaning of 'preparedness' in a disaster-prone country

In Japan, natural disasters such as earthquakes, typhoons, and heavy rains occur frequently.

What is important is not 'what to do after it happens,' but how much you were prepared before it happened.
This principle also applies to economic risks like inflation.

BCM required for companies

Companies are part of social infrastructure.
If their activities stop, it has a major impact on society as well.

That is why BCP (Business Continuity Plan) is important, as is BCM (Business Continuity Management) to execute it.
The scope is not limited to natural disasters.

• Infectious diseases
• Equipment accidents
• Cyberattacks
• And economic environment changes such as inflation
Anticipating all risks and creating a system that does not stop the business.

That is the essence of BCM.

Proactive risk management

Risk management is not just about defense.

Rather, what is important is risk hedging in offense.

In an inflationary environment, 'proactive decision-making' is required, such as:
• Decisions on price pass-through
• Redesigning added value
• Reviewing the business portfolio

Maintaining the status quo is not safe; it is a risk.

Thinking about risk with 'Sky, Rain, Umbrella'

McKinsey's 'Sky, Rain, Umbrella' framework.
• Sky: Fact (There are rain clouds in the west)
• Rain: Interpretation (It looks like it will rain)
• Umbrella: Action (Take an umbrella)

The essence of risk response is to
anticipate, interpret, and act.

Risks always have signs.
Not missing them leads to taking the initiative.

Always be prepared

Risks do not start suddenly, but from signs.

Be Prepared

Risk hedging is not about being afraid.
It is a technique to keep challenging.

Only those who know how to take a fall (ukemi) can truly move forward.